Better to be Bored than Broke….
The latest random thoughts from Richard Russell:
“I’ve given up on the odds of the Dow and the Transports bettering their May highs. This, I think, is the main fact that we should deal with. This, from a Dow Theory standpoint, tells us that the market will do one of two things: it will mark time or it will go down. The only thing worse than being bored in the market is to lose money. Therefore, I personally will stay on the sidelines until the market tells me something — something more than it has so far. I don’t mind being bored, but I do mind losing money stupidly.
Meanwhile the whole world waits on Bernanke and his speech Friday at Jackson Hole. My guess: he’ll try to talk the market up while doing nothing. Good luck to me, my subscribers, and Ben Bernanke. I’d rather be bored than broke.
Dangerous market – Joe Granville notes that he got a major sell signal on August 17. The Dow on that day rose to a record new high of 13,275.20, with half the Dow Industrial stocks closing down on that day. Joe says, “I saw it as the most bearest upside non-confirmation ever recorded.” I would heed Joe’s warning. This market is being held up by a few choice Dow Industrial stocks. Like Joe, I do not trust this market. It’s being held up by a few stocks in the hope that Bernanke will save us. If the Jackson Hole speech on Friday is a disappointment, watch out. But we already have our danger signals.”
Source: Dow Theory Letters
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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9 Comments
I think that current market set up favors a short, a lot of bullish news should already be priced in and there should be much more room on the downside than on the upside. Catalyst? Lack of bold action from CB, bad surprises in EZ… Main risk: macho talk from Mario Draghi. I initiated a short on European and US indexes around these levels.
Sorry, but Richard Russell has been almost 100% wrong the past few years. He has been in the game a long time and I am not suggesting he has lost it, but wrong way too often to be of any use. Granville hasn’t been right about anything since 1980. He predicted a 50% drop in the market at the beginning of this year, how is that working out? The guy is clueless, and anyone who listens to him deserves to lose money.
Hey Give Me a Break,
Who has been consistently right over the past five years?
Paul Krugman, Barry Ritholtz, and Cullen has been pretty spot on too.
I’m not suggesting anyone should be right 100% of the time. That’s impossible. But anytime you see a “guru” speak out you need to go and look at their history and framework of their calls to see if they have been consistent or if their “system” still applies today. The majority of the time, people like Granville make one good crazy call and rise to fame and feed off of that for the rest of their careers. In recent years, it’s been people like Nouriel Roubini and Meridith Whitney. In the past, it has been charlatans like Harry Dent and Robert Prechter. I’m not suggesting any of these people are not smart, but they are better marketers than market callers. None of them have a freaking clue what is going to happen. But some of them do worse than just flipping a coin, and Russell is a good example of that the past few years.
That this ain’t a normal wall of worry should be evident. How clueless would a person have to be to ignore defence in this market?
Yep – it is increasingly clear folks are going to quit driving, buying food, having babies and otherwise living life.
Come on! The economy is operating at a subsistence level and has been for the past three years. And yet most companies have steadily increased profits and will continue to employ smarter technology to make further improvements.
Good luck market timers. Sorry Wall Street – your high volume days are past.
Do any market historians know of other cases when the market has stayed for 17 days within a half percent of 4-year highs, but not been able to close above the 4 yr high of 1419? Maybe Ben’s Jackson Hole speech Friday will be the catalyst to finally punch this flat market over the top. But I am playing defense. I don’t see the fundamentals improving at all here.
It is all in the language. Bernanke has to keep the muppets (i.e. wall street investment managers) doped up on hope for a future easing. Otherwise we retest the 2009 lows.
I doubt we will test 2009 lows at least in the DOW. The price weighted mechanism of the DOW sent the insolvent financials to single digit. Any further movement down will have little effect as high priced IBM’s and Caterpillars have the most influence. Think of BAC crashing from $40′s to $3 in a relatively quick time span. The substitution effect and market timing of the group in putting more defensives like Kraft and Travelers resulted in healthier balance sheets with less leverage. Now the S&P is a completely different story! It is a true benchmark and could be chopped significantly with a severe recession.